Friday, June 5, 2009

Since Ben and his CNBC cronies have been ahhing and ooohing about hyperinflation, and the hyperdeflation of debt, both expected to start any minute now, we thought it's time to check out expectations for the fed fund target rate. Turns out the market is really buying into this inflation story. Of course, a mere four months ago the Taylor rule said we need -6% rates to stabilize the economy, but it is amazing what a little propaganda and a little (well, maybe not so little) excess cash printing will do to expectations.

The table below indicates that 10% of "professionals" expect a raise in the Fed Funds rate to 0.25% by June, 22.3% think we will be at 0.50% by August, and 7.4% think we will be at 0.75% by September. Mmmk, we are curious how the fact that over the past week mortgages have increased by 1% erasing hundreds of billions in consumer net worth jives with this inflationary expectation, but that's fine. After all, there is no indication that we are even close to escaping the gravity pull of bizarro world.

Also for those curious enough, I present the intraday Fed Funds 30 futures rate.

Since Ben and his CNBC cronies have been ahhing and ooohing about hyperinflation, and the hyperdeflation of debt, both expected to start any minute now, we thought it's time to check out expectations for the fed fund target rate. Turns out the market is really buying into this inflation story. Of course, a mere four months ago the Taylor rule said we need -6% rates to stabilize the economy, but it is amazing what a little propaganda and a little (well, maybe not so little) excess cash printing will do to expectations.

The table below indicates that 10% of "professionals" expect a raise in the Fed Funds rate to 0.25% by June, 22.3% think we will be at 0.50% by August, and 7.4% think we will be at 0.75% by September. Mmmk, we are curious how the fact that over the past week mortgages have increased by 1% erasing hundreds of billions in consumer net worth jives with this inflationary expectation, but that's fine. After all, there is no indication that we are even close to escaping the gravity pull of bizarro world.

Also for those curious enough, I present the intraday Fed Funds 30 futures rate.